As treaties and trade agreements are implemented this year, more U.S. companies are looking at the Association of Southeast Asian Nations for fresh business opportunities. Fortunately, a whole host of logistics and transportation service providers are laying the groundwork to overcome inherent infrastructure challenges.

Today, U.S. trucking companies face more regulations than any time in history—and they claim this “regulatory tsunami” is putting the clamp on U.S. productivity. During this session shippers will gain a better understanding of the current state of trucking regulations (HOS & CSA) and the impact they're having on capacity and rates.

The United States Department of Transportation (DOT) recently unveiled the details relating to an agreement made in early March regarding the cross-border trucking program between the United States and Mexico.

In March, the U.S. and Mexico said they reached an agreement for how to resolve the long-history of issues the program has witnessed, especially in the last two years. They said that they have come up with a solution that will “allow for the establishment of a reciprocal, phased-in program built on the highest safety standards that will authorize both Mexican and United States long-haul carriers to engage in cross-border operations under NAFTA.”

DOT officials said that the “proposed new program prioritizes safety, while satisfying the United States’ international obligations…[and] builds upon the progress announced by Presidents Obama and Calderon in early March.”

DOT added that the proposed new program also will promote economic opportunities and job growth in the United States. Details of the program are available in a Federal Register notice, with 30 days available for public comments to be submitted once the notice is published. And DOT said that when the comment period is completed it will “formally respond” to comments and take them into account while putting together a final program.

In 2009, the pilot program for cross-border trucking was eliminated as part of the White House’s $410 billion Omnibus Appropriations Act, H.R. 4105. Even through this program-killing measure was approved, that Obama administration said it would work to create a new cross-border, long distance trucking program between the U.S. and Mexico.

Soon after the program was eliminated, the Mexican government said it would place tariffs on roughly 90 American agricultural and manufactured exports as payback for the U.S. decision to shutter the program.

These tariffs amount to $2.4 billion of American goods, ranging from fruit juices to pet food to deodorant, among others, ranging from 10 percent to 45 percent, with affected products coming from 40 states.

According to White House officials, once a final agreement is reached, Mexico will suspend its retaliatory tariffs in stages beginning with reducing tariffs by 50 percent at the signing of an agreement and will suspend the remaining 50 percent when the first Mexican carrier is granted operating authority under the program. They added that Mexico will terminate all current tariffs once the program is normalized, and said that the agreed schedule will not affect the rights and obligations of Mexico or the United States under the NAFTA, including Mexico’s right to apply its retaliatory measures.

“We view the agreement that was announced as a positive, because it will allow trucking to fully participate in commerce with Mexico in accordance with the guidelines established in the NFATA treaty,” said Patrick Quinn, co-chairman and president, U.S. Xpress Enterprises Inc., in a recent interview. “It’s very encouraging that the announced agreement places a great emphasis on safety, including EOBRs and compliance with the Hours-of-Service. If the participating carriers can meet the standards the U.S. has set for both safety and emissions, then two of the biggest concerns will have been addressed. The approach that they are taking through the reciprocal, phased-in pilot program is a good way to take the first steps. Another positive coming out of the agreement is the elimination of tariffs that Mexico has placed on many goods. The removal of these tariffs can help the economic recovery here in the U.S.”

But the Owner-Operator Independent Drivers Association let it be known that it maintains opening U.S. highways to Mexican trucks is the wrong way to go.

“This is the wrong plan at the wrong time for numerous reasons,” said Todd Spencer, Executive Vice President of OOIDA, in a statement. “It’s irresponsible and reckless. The Administration must reconsider or Congress must step in again to force them to do the right thing.”

Spencer and the OOIDA said that U.S.-based truckers, particularly owner-operators, deal with increasing safety, homeland security, and environmental regulations that impact the cost of doing business and ability to make a living on a daily basis. What’s more, he pointed out that the regulatory framework Mexican drivers face pales in comparison to the U.S.

Even with this situation mired in flux for so long, U.S truck-based trade with Mexico remains strong, with March 2011 trade up 27.6 percent year-over-year to $320.3 billion, according to DOT data.

Esteban A. Zimbron, a Mexico-based transportation expert told LM that Mexico runs roughly 350,000 commercial trucks while the U.S. runs closer to 5 million, which means that as little as ten percent of the U.S. market could double-up the actual market size of Mexico, with the actual size of the Mexican market being potentially meaningless for U.S.-based carriers.

There are also several other hurdles that are relevant in hammering out a deal that works for both countries, said Zimbron.

“There is a $300 (USD) that each Mexican driver has to pay in order to try to obtain its VISA and even after paying such amount, there is no warranty that the VISA will be approved,” said Zimbron. “This adds up to all other investments that Mexican carriers have to do to prove their vehicles comply with all DOT and ICC regulations. This also reduces the number of Mexican carriers having enough moneys to take these risks. On the other hand, U.S. drivers could have their Mexican VISA’s almost for free.”

Another factor is that a Mexican bilingual driver’s wages and benefits could be as low as 10 dollars per hour (as an average) and could be less depending on the size of the vehicle and the type of route, explained Zimbron.
“This is one of the reasons why, the President of Mexico Transportation Chamber and the owners of Mexican carriers as a whole, are certain that the US teamsters will never allow this to happen, regardless of Calderon and Obama’s efforts to enforce the agreement,” he said.

And if the program does eventually come to fruition both countries will have to implement several major changes to the Customs laws and regulations in order to expedite the border crossing processes, but Zimbron also indicated that should an agreement happen there will be long list of benefits for U.S. and Mexican shippers. But at the moment he said there is only uncertainty and negative expectations on both sides of the border.

About the Author

Jeff BermanGroup News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).

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The Department of Transportation’s Bureau of Transportation Statistics (BTS) reported this week that U.S. trade with its North America Free Trade Agreement partners Canada and Mexico in January dropped 1.2 percent to $89.3 billion.

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